Understanding Voluntary And Compulsory Deductibles In Car Insurance

by SMCIB on Thursday, 20 June 2024

Understanding Voluntary And Compulsory Deductibles In Car Insurance

Imagine you're driving a car at 100kmph without wearing a seatbelt on a smooth highway. It might look like something that we witness on a day-to-day basis, and nothing usually happens, but what if some animal comes out of nowhere, and you had to use brakes!!!

Now, you'd be wishing for safety measures, say a seatbelt, at least…

This is where Car Insurance comes into play!

Car Insurance is like that seatbelt that protects your financial well-being in case of unexpected expenses.

Let's understand the subject a little better-

In the world of insurance, many terms can be confusing. One such term is "deductibles."

First thing first, What is  Deductible?

A deductible is the amount you have to pay out of your pocket before your insurance covers the rest. And they come in two types - voluntary and compulsory deductibles. In the article below, we will dive into the details of these two types and how they affect your car insurance policy.

Deductibles In Car Insurance

Car insurance deductibles refer to the costs you will have to shell out of your pocket before your insurance comes to cover the rest of your claim. These deductible amounts are established by the IRDAI and are calculated based on the cubic capacity of your car's engine. It is important to understand the two types of deductibles in car insurance, and we'll delve into them further.

Types Of Deductible

When it comes to car insurance deductibles, there are two main types to consider -

  1. Voluntary Deductible
    This is an optional amount you can select to pay out-of-pocket to reduce your premium.
  2. Compulsory Deductible
    On the other hand, this is a required amount determined by the insurance regulator that you must pay before your insurance coverage pays for itself.

Let’s look at each deductible in detail-

Voluntary Deductible

As discussed earlier, a voluntary deductible is the amount you pay from your end for car repairs. While this option reduces your policy's premium, it also increases the out-of-pocket expenses when filing a claim.

When you initially purchase your policy, you should determine the amount you are comfortable paying yourself. This chosen deductible amount will apply to each claim you file throughout the policy period. Remember that the insurer will only cover the portion of the claim that surpasses the combined total of the voluntary and compulsory deductibles.

Below, you will find a table displaying the voluntary deductible options and the corresponding discounts offered after applying it -

Voluntary Deductible

Discount Applicable

Rs. 2,500

A 20% discount is applicable on the own damage premium of the vehicle, with a maximum discount of Rs. 750.

Rs. 5,000

The own damage premium of the vehicle is subject to a 25% discount, capped at a maximum of Rs. 1,500.

Rs. 7,500

A 30% discount (maximum amount Rs. 2000) is offered on the vehicle's own damage premium.

Rs. 15,000

A 35% discount is offered on the vehicle's own damage premium, up to a maximum of Rs. 2,500.

The discount could differ depending on the insurance company.

Let’s understand this better with the help of an example -

Sultan decides to buy a car insurance policy with an IDV of Rs. 5 lakhs. The premium for the policy totals around Rs. 12,000. He opts for a voluntary deductible of Rs. 5,000 to reduce this cost.

As a result, the premium he is required to pay decreases to Rs. 10,500 (12,000 - 1,500). However, there is a catch - each time he files a claim, Sultan must first pay the voluntary deductible of Rs. 5,000/- before the insurer contributes to the rest of the claim.

It is important to note that for clarity, we are not factoring in the compulsory deductible in this explanation.

Compulsory Deductible

In car insurance, you should pay the compulsory deductible as a part of any claim. According to IRDAI regulations, the compulsory deductible for cars with an engine cubic capacity (cc) of up to 1,500 cc stands at Rs. 1,000 and Rs. 2,000 for cars with an engine capacity exceeding 1,500 cc.

It is important to note that this compulsory deductible does not impact the insurance premium, which is determined by the car's model, year of manufacture, and Insured Declared Value (IDV).

Using the previous example as a reference -

Let's consider Sultan’s car, which is a 1300 CC vehicle. In this case, the compulsory deductible he must pay is Rs. 1000.

If Sultan has not opted for any voluntary deductible, he must pay Rs. 1000 each time he claims before the insurance company contributes for the rest. However, if he has chosen a voluntary deductible, he must pay Rs. 5000 + Rs. 1000 every time he files a claim.

Please note that to keep things simple, we have not included additional charges, such as consumable charges, in this explanation.

Compulsory Deductible Vs. Voluntary Deductible

Let’s look at a comparative table to understand each deductible better -


Compulsory Deductibles

Voluntary Deductibles


You must pay this mandatory amount at the time of filing a claim.

You have the option to choose this amount voluntarily. If you opt for it, you must pay this amount each time you make a claim.


The premium remains unaffected by this mandatory payment.

Depending on the deductible amount you select, this will lower your premium.

Payable Amount

As per IRDAI regulations, the compulsory deductible in car insurance is determined based on the cubic capacity of the car's engine.

You can refer to the table mentioned above to see the impact of the voluntary deductible you choose.

With this comparative analysis, we hope you have a clear idea of how voluntary and compulsory deductibles differ from each other.

Let’s now get to the core of when you should opt for a deductible.

When To Choose A Deductible?

Compulsory deductibles are payments you must make when filing a claim. However, you have the freedom to decide whether or not to opt for a voluntary deductible.

Your comfort level and the level of risk you are willing to take in the event of a claim determine the amount of voluntary deductible you select. Choosing a voluntary deductible can help reduce the claim amount, but you will need to pay higher out-of-pocket expenses.

Here are some things to think about when choosing your Voluntary deductible -

  • Car Value
    If your car is expensive, your insurance premium will be higher. To lower it, choose a lower voluntary deductible.
  • No Claim Bonus (NCB)
    Small claims can reduce the amount of NCB you have earned. Hence, choose a deductible amount similar to the repair amount so you may avoid raising claims.
  • Driving Habits
    If you are a safe, skilled driver, you are less likely to make a claim. Thus, you can save on premiums by choosing a higher voluntary deductible.
  • Safety Of Your Area
    If you live and drive in safe areas with fewer accidents, you might consider a higher deductible. In these places, the chances of needing to pay the deductible after an accident are lower.

Final Words

To adequately protect your vehicle and finances, you should consider important facts when choosing deductibles for your car insurance. Compulsory deductibles are mandatory payments, while voluntary deductibles offer flexibility. Choosing the right deductible amount depends on your comfort level, risk tolerance, and various factors such as your car's value, driving skills, and location. Opting for a higher voluntary deductible can save you money on premiums, but it means higher expenses right from your pocket during the claim. Assessing your needs and evaluating these factors will help you make informed decisions about voluntary deductibles that suit your circumstances.

So next time you’re behind the wheel- don’t forget to safeguard yourself with a seatbelt and, yeah, car insurance.

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